Sunday, April 24, 2011

The New York Times: A Real Choice on Medicare

The New York Times editorializes on competing plans for the future of Medicare:
We know it is not how most people want to spend their time, but Americans need to give a close reading to the Democrats’ and Republicans’ plans for Medicare reform. There are stark differences that will profoundly affect all of our lives — and clear political choices to come.
Click here for the complete editorial, which lays out the differences and similarities between the Democratic and Republican plans for the nation's 46-year commitment to old age health care:
President Obama wants to retain Medicare as an entitlement in which the federal government pays for a defined set of medical services. The Ryan proposal would give those turning age 65 in 2022 “premium support” payments to help them buy private policies. There is little doubt that the Republican proposal would sharply reduce federal spending on Medicare by capping what the government would pay at very low levels. But it could cause great hardship by shifting a lot of the burden to beneficiaries. The Congressional Budget Office estimates that by 2022 new enrollees would have to pay at least $6,400 more out of pocket to buy coverage comparable to traditional Medicare.
It's an open question as to whether either proposal is the right one. Congressman Ryan's proposal would, as the Times points out, reduce spending on Medicare. It would do little, however, to reduce spending on health care as costs would simply be passed from the government to the elderly.

Unless their use is mandated and heavily regulated, the insurance vouchers are likely to be practically worthless. Individual health insurance is sold on the basis of experience-rated premiums, meaning that the claims experience of the relevant group dictates the price of an individual premium. No group requires medical care more than the elderly, and their premiums will reflect a pool consisting only of the elderly. The CBO estimate for 2022 reflects only the first year of Rep. Ryan's plan. By design, in subsequent years the value of the vouchers increases at less than the rate of medical inflation; over time, they will purchase less and less insurance. Thus, even if premiums don't go up, coverage will go down at the time of life when people need it most.

What about President Obama's proposal? Economist Laurence Kotlikoff argues that we have already passed the point of no return regarding Medicare, and that even well-executed reforms will be too little too late. Given the proven power of medical, pharmaceutical, and insurance lobbyists and given Congress' unwillingness to turn Medicare reform over to an independent commission, it's easy to imagine that many if not most reforms will be hobbled right from the starting gate.

At the end of the day, the best way to reform Medicare may be to eliminate it as a vehicle dedicated to elder health care (as the Republicans propose) and put in its place either a single program of basic benefits that covers all Americans or strong incentives to individual states to tailor universal coverage to their needs and sociopolitical culture.


  1. Thanks for this, K. It's clear, concise and offers a viable alternative. I'll pass it around.

  2. Thanks, Paula. And good luck with your surgery.

  3. Good hard common sense here, K. Too bad Washington severely lacks it.

  4. >>strong incentives to individual states to tailor universal coverage to their needs and sociopolitical culture.

    what sociopolitical culture? Do people need different health care models in SC than they do in, say, IL? Are New Yorkers healthier/sicker than Mississipians so they need more/less benefits? It looks to me like the states than need the most help are already getting at least some of what they need in the form of Medicaid dollars from the federal government. Why would they want to go it alone...unless, of course, they're planning to limit the population receiving benefits. That is, exclude the poor, the immigrants (legal or illegal), the unemployed, the very young, the very old?

  5. Arguably, the driving factors are different from state to state. Vermont, for example, is moving toward universal coverage because its rate of medical inflation is one of the highest in the country. Coverage is actually pretty good there.

    When Oregon tried u.c. (and they are likely to try it again), they set a hard budget and prioritized conditions. That fit state political sensibilities. The point is that unlike Social Security, Medicare actually does face severe fiscal issues brought on by medical inflation and an aging population (some economists argue that the latter factor isn't as important as the former).

    Should Congress punt -- a not inconceivable proposition -- we have to consider alternatives. I was 100% mistrustful of a state-based approach, but developments in Vermont have dialed that down somewhat. After all, success there would put immediate pressure on the other New England states to follow suit. I suspect that the sociopolitical culture of Vermont (a small blue state) has allowed it to move sooner rather than later.

    Note of course that Vermont's proposed approach doesn't incorporate Medicare/Medicaid.

  6. Massachusetts is inching its way toward single payer model, but may be waiting until Sen. Brown is out and the state gets bluer. As an interim, Gov. Patrick is setting up regional councils (?) to set fees and act as overseer. My guess is the next step will be to just go to single payer.
    Vermont's program won't start for a few years. In that state, there's only one really big hospital, which makes it fairly easy for the state government to take on the task. That would not be the case in Massachusetts or CT, not sure about the other three NE states.

  7. Paula, is MA doing anything at the government level to address their shortage of primary care physicians? I appreciate that this is a nationwide problem, but from what I understand going to universal coverage exacerbated this in the Bay State. I rush to add that I see this as a problem to be solved, not as a reason to not do universal coverage.